AUD Weekly Market Watch 31/08/2015

Last Week recap

EUR/USD Reversed direction, trading lower as world stock markets plunged early in the week followed by a strong rebound in both stocks and the Greenback after Monday’s initial selloff. The week began with the rate making its weekly high of 1.1713 on Monday as risk aversion drove the Euro up after the Chinese stock market lost -8.5% and the U.S. Dow Jones dropped -1000 points on the opening.  The rate then began selling off on Tuesday as world stock markets rebounded after a Chinese interest rate cut. Economic data had German Ifo Business Climate print at 108.3 compared to an expected 107.6, while U.S. CB Consumer Confidence printed at 101.5 versus 92.8 anticipated and U.S. New Home Sales, which increased an annualized 507K versus 512K expected. On Wednesday, the pair extended its losses after U.S. Core Durable Goods increased +0.6% m/m versus +0.3% anticipated, while Durable Goods Orders rose +2.0% m/m, significantly higher than the expected decline of -0.4%. Also, the New York Fed's William Dudley said that, “the decision to begin the normalization process at the September FOMC meeting seems less compelling to me than it was a few weeks ago.” The rate continued its decline on Thursday after U.S. Preliminary GDP increased +3.7% q/q versus an expected +3.2%, nevertheless, U.S. Pending Home Sales rose +0.5% m/m versus +1.3% anticipated. Thursday was also the first day of the Jackson Hole Symposium, the Philadelphia Fed’s Charles Plosser said that, “as the economy has improved, we need to anticipate that we will have to raise rates probably sooner than a lot of people have thought and that our language has indicated.” The pair then made its weekly low of 1.1155 on Friday after Spanish Flash CPI declined -0.4% y/y versus -0.1% expected, while German Preliminary CPI came out flat versus an expected decline of -0.1%. U.S. data had the Goods Trade Balance show a deficit of -59.1B compared to a previous reading of -62.3B. EUR/USD went on to close at 1.1180, with an overall loss of -1.8% from its previous weekly close.   

USD/JPY Extended its previous week’s losses last week as asset flows favoured the Yen over the Greenback and with mixed economic numbers from both countries. The week began on a volatile note, with the pair declining sharply and making both its weekly high of 122.02 and its weekly low of 116.14 on Monday as stock markets around the world crashed. Also, Japanese PM Shinzo Abe said that it was “inevitable” for the BOJ to fall behind schedule to achieve its 2% inflation target in the wake of sharply lower oil prices, he stated, “I understand the BOJ’s explanation that achieving the target has, as a matter of fact, become difficult under these circumstances.” The pair then began strengthening on Tuesday after a better than expected U.S. CB Consumer Confidence number. On Wednesday, the rate continued higher after U.S. Durable Goods Orders data beat the consensus. The pair extended its gains on Thursday as U.S. Preliminary GDP beat estimates by a half a point. Friday saw the rate continue gaining after Japanese Household Spending declined -0.2% y/y versus +0.9% expected and Japanese Retail Sales, which increased +1.6% y/y compared to an expected +1.1% increase. Also, Tokyo Core CPI declined -0.1% y/y as widely anticipated. USD/JPY went on to close at 121.62, with a loss of -0.4% for the week.

GBP/USD Reversed direction, selling off last week as risk appetite favoured the Greenback over European currencies and with mixed economic numbers from both countries. The week began with Cable gaining on Monday in the absence of any significant economic data out of either country. The pair then declined after making its weekly high of 1.5818 on Tuesday after mixed U.S. consumer confidence and housing data. Wednesday saw Cable drop sharply after better than expected U.S. Durable Goods Orders numbers. On Thursday, the rate extended its losses after a better than expected U.S. Preliminary GDP number. Cable then made its weekly low of 1.5335 on Friday despite UK Preliminary Business Investment increased +2.9% q/q versus +1.6% expected, while UK Second Estimate GDP increased +0.7% q/q as widely anticipated. GBP/USD went on to close at 1.5391, showing an overall weekly decline of -1.9%. On Saturday, BOE Governor Mark Carney stated at the Jackson Hole Economic Symposium that, “The prospect of sustained momentum in the UK economy and the gradual firming of underlying inflationary pressures will likely put the decision as to when to start the process of gradual monetary policy normalisation into sharper relief around the turn of this year. To be clear, that opinion doesn’t prejudge any particular decision. But it does indicate that recent events do not yet, to my mind, merit changing the MPC’s strategy for returning inflation to target – a strategy that already reflects the balance of two large gross effects: namely domestic strength on the one hand and disinflationary forces from the combination of the exchange rate and global weakness on the other.”

AUD/USD Continued selling off last week as the situation in China continued to weigh on the Aussie. The week began with the rate dropping sharply on Monday and making both its weekly high of 0.7310 and its weekly low of 0.7030 as the market reacted with volatility to the -8.5% decrease in the Chinese stock market. The pair then consolidated on Tuesday after mixed U.S. consumer confidence and housing data. On Wednesday, the rate dropped a fraction despite Australian Construction Work Done increasing +1.6% q/q, significantly higher than the decline of -1.5% that was anticipated. Also, in a speech by RBA Governor Stevens, he noted that “Growth rates have mostly started with a ‘2’ for a while now – despite the lowest interest rates in our lifetimes, banks able and willing to lend and measures of consumer and business confidence generally about average (notwithstanding what we keep reading in the media). This may be simply a feature of the post-financial crisis world – the need for balance sheet repair.” The rate then gained ground on Thursday despite Australian Private Capital Expenditure, which declined -4.0% q/q versus -2.5% expected. The pair then consolidated on Friday after lower than expected U.S. consumer sentiment and personal spending numbers. AUD/USD closed at 0.7165, with a decline of -2.0% overall for the week.

USD/CAD Gained a fraction last week as the price of oil recovered significantly and with very little significant economic data out of Canada. The week began with the pair gaining on Monday in the absence of any significant data out of either country. The rate then made its weekly high of 1.3352 on Tuesday after mixed U.S. consumer confidence and housing numbers. Also, BOC Governor Council member Schembri stated that, “Since the crisis, persistently weak global demand—especially real investment—coupled with sustained low central bank policy rates and large asset purchases has helped to lower long-term interest rates and, in turn, reduce financing costs for financial intermediaries and mortgage rates for households.” The rate then began weakening on Wednesday despite better than expected U.S. Durable Goods Orders data. The pair extended its losses on Thursday despite U.S Preliminary GDP, which came out a half point better than expected. Friday saw the rate consolidate after Canadian RMPI declined -5.9% m/m versus -4.0% expected. USD/CAD closed at 1.3202, with an overall gain of +0.2% for the week.

NZD/USD Declined sharply last week as risk aversion weighed heavily on the Kiwi and despite better than expected New Zealand trade numbers. The week began with significant volatility as the rate fell sharply on Monday, making both its weekly low of 0.6248, and its weekly high of 0.6684 as the Chinese stock market and stock markets around the world sold off. The rate then gained on Tuesday after New Zealand Inflation Expectations increased +1.9% q/q versus a previous reading of +1.9% and the New Zealand Trade Balance, which showed a deficit of -649M compared to an expected deficit of -665M. The pair declined on Wednesday after better than expected U.S. Durable Goods Orders data. On Thursday, the pair gained a fraction despite better than expected U.S. Preliminary GDP. Friday saw the rate lose a fraction after lower U.S. economic data. NZD/USD closed at 0.6456, showing an overall loss of -3.5% from its previous weekly close. 

The Week Ahead

USD: The U.S. economic calendar is busy this coming week, featuring key jobs data on Wednesday and Friday.  Monday starts the week’s highlights off with Chicago PMI (54.7), and Tuesday’s key events include ISM Manufacturing PMI (52.6). Wednesday then offers the ADP Non-Farm Employment Change (204K), Revised Nonfarm Productivity (2.9%), Factory Orders (0.8%), and Crude Oil Inventories (last -5.5M).  Thursday features the Trade Balance (-43.2B), Weekly Initial Jobless Claims (273K) and ISM Non-Manufacturing PMI (58.30, while Friday offers the start of the G20 Meetings, a speech by FOMC Member Lacker, Average Hourly Earnings (0.2%), Non-Farm Payrolls (220K), the Unemployment Rate (5.2%). Saturday concludes the week’s key events with the final day of the G20 Meetings.

AUD: The Australian economic calendar is quite active this coming week, featuring the RBA’s Cash Rate Decision on Tuesday.  Monday starts the week’s highlights off with Company Operating Profits (-1.9%), and Tuesday’s key events include Building Approvals (3.0%), the Current Account (-15.9B), the RBA’s Cash Rate Decision (unchanged at 2.00%), and the RBA Rate Statement. Wednesday then offers GDP (0.4%), while Thursday features Retail Sales (0.4%) and the Trade Balance (-3.10B). The G20 Meetings start on Friday and will continue through Saturday. Resistance for AUD/USD is seen at 0.7418/0.7682, 0.7348/71 and 0.7215/84, with support noted at 0.7016/69, 0.6753/73 and 0.6670/97.

NZD: The New Zealand economic calendar is quiet this coming week, only featuring the ANZ Business Confidence survey (last -15.3) on Monday and the tentatively scheduled GDT Price Index (last 14.8%) on Tuesday. Also the G20 Meetings will take place on Friday and Saturday. The chart for NZD/USD shows resistance at 0.6618/0.6769, 0.6557/71 and 0.6466/96.  On the downside, technical support is expected 0.6407/42 and 0.6248.

GBP: The UK economic calendar is less active than usual this coming week, only featuring Manufacturing PMI (51.9) and Net Lending to Individuals (3.9B) on Tuesday; Construction PMI (57.6) on Wednesday and Services PMI (57.6) on Thursday. Also, Monday is a Bank Holiday, and the G20 Meetings will take place on Friday and Saturday. Resistance to the topside for GBP/USD shows at 1.5530/1.5722, 1.5766/1.5818 and 1.5909/29, while support for the pair is expected at 1.5335 and 1.5424/66.

EUR: The Eurozone economic calendar is busy this coming week, featuring the ECB’s Minimum Bid Rate Decision on Thursday.  Monday starts the week’s highlights off with German Retail Sales (-2.3%), the EZ CPI Flash Estimate (0.2%), and the EZ Core CPI Flash Estimate (1.0%). Tuesday’s key events include Spanish Manufacturing PMI (53.9), the German Unemployment Change (-5K) and the EZ Unemployment Rate (11.1%). Wednesday then offers the Spanish Unemployment Change (last -74.0K), while Thursday features Spanish Services PMI (59.3), EZ Retail Sales (0.6%), the ECB’s Minimum Bid Rate Decision (unchanged at 0.05%) and the ECB Press Conference. Friday’s important data then concludes the week with German Factory Orders (-0.5%). In addition, the G20 Meetings will take place on Friday and Saturday. Resistance for EUR/USD is seen at 1.1436/66, 1.1387/1.1409 and 1.1207/89, with support showing at 1.1128/55, 1.1005/48 and 1.0954.

JPY: The Japanese economic calendar is quiet this coming week, only featuring Average Cash Earnings data (-2.3%) on Friday, as well as the G20 Meetings that will run through Saturday. Resistance for USD/JPY currently shows up at 123.56/124.57, 122.45/123.00 and 121.81/93, with support indicated at 120.08/50, 118.49/88 and 116.14.

CAD: The Canadian economic calendar is busier than usual this coming week, featuring key jobs data on Friday.  Monday starts the week’s highlights off with the Current Account (-17.2B), and Tuesday’s key events include GDP (0.2%). Wednesday then offers little of note, while Thursday features the Trade Balance (-1.4B) and Friday offers the Employment Change (2.0K), the Unemployment Rate (6.8%), Labor Productivity (0.1%) and Ivey PMI (53.5). Also, the G20 Meetings will be held on Friday and Saturday.  Resistance for USD/CAD is seen at 1.3352, 1.3305 and 1.3212/60, while support shows at 1.3192, 1.3006/1.3102 and 1.2915/51.